Financial Analyst Affirms Google's $1 Billion In "Default Search" Payments To Apple

Financial Analyst Affirms Google’s $1 Billion In “Default Search” Payments To Apple

Feb 11, 2013 at 7:25pm ET by Greg Sterling

Apple Google Logos Last year the FTC asked Apple to disclose the terms of Google’s “default” search presence on iOS. This was part of the US government’s broader antitrust investigation of Google, which is now over. To my knowledge, none of that information made it out into the public eye.

However, at approximately the same time, an analyst at Macquarie Capital estimated that Google was making $1.3 billion annually in paid search revenue from iOS devices. Macquarie speculated that Google returned about $1 billion of that to Apple as part of the agreement that made Google the default search engine on the Safari browser.

A little less than a year later, it’s being reported that another financial analyst has come up with a similar annual estimate of the value of Google’s default iOS search deal with Apple: $1 billion. Morgan Stanley’s Scott Devitt is responsible for the new estimate, published in a report released on Friday.

Devitt disagreed with Macquarie, arguing that the structure of the relationship is probably not a “revenue sharing” deal but instead a straight fee-per-device payment from Google to Apple. Devitt believes that Google pays Apple roughly $3.20 per iOS device, which would avoid the accounting issues arising from a revenue sharing agreement.

Google and Apple originally struck an agreement in 2003 that made Google the default search engine on the PC version of the Safari browser. And even during the height of the “thermonuclear” period, Steve Jobs renewed search and maps deals with Google.

The FTC has not intervened in the Google-Apple relationship, so this payment arrangement could go on for as long as the parties desire, in theory. However, it would be quite interesting if Google or Apple declined to renew.

While it’s extremely unlikely that Apple would try and make Siri into a full-fledged search engine, it could significantly beef up Siri’s content search and discovery capabilities. In that capacity, Apple might be able to siphon off selected commercial queries in key categories such as local, travel and entertainment.

Late last year, Apple hired William Stasior to run Siri. Stasior took over Amazon’s A9 after Udi Manber left for Google. He was also an executive at AltaVista. We can thus infer that Apple has search on its mind and will continue to develop and evolve its useful-if-flawed voice assistant.

Mobile is at the center of current innovation in search, and Apple could be a bigger player if it chose to. Regardless, the company would still need a “fall back” Web search capability. And, despite the opinion of Bill Gates that “Bing is the better product at this point,” that Web search engine is likely to remain Google.

About The Author: Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling. See more articles by Greg Sterling

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http://www.facebook.com/amel.abrha Amel Abrha

thanks for posting
PlumbSearcher

OMG I thought that search engines is just “one click away”, but they are actually one dollar away
http://twitter.com/BIGELLOW Bob Bigellow

It’s just the default. You can easily change it.
http://profile.yahoo.com/VSRGYCL4GJCLQGSUM5K2S7DYXI Timothy

my roomate’s sister makes $62 an hour on the computer. She has been
without work for 5 months but last month her paycheck was $17044 just
working on the computer for a few hours. Read more here View More
http://www.v2interactive.net/ Josh

I would love to see Google say “Nope, use Bing – we’re cool with it”. Just to see how full of it Apple is. Like Apple will use their primary competition as a supplier to search listings. Give me a break. Capitalism at it’s best.
PlumbSearcher

I believe I saw a report at a conference (SIGIR? WWW?) that 80% of users never change default search engine whatever default search engine you assign them.
http://twitter.com/YoungbloodJoe Joe Youngblood

With the revelation that 50% of Google searches come from partnership deals, could we not see Microsoft dig down into some deep pockets to snipe this deal?
http://www.siliconvalleywatcher.com/ Tom Foremski

It’s long been rumored that Apple pays for all of its OS development from Google’s search payments. It could be said that Google develops all the mobile OSes!